Testimony before the Government Management, Information and Technology Sub-Committee of the House Committee on Government Reform

Illinois’ Performance Contracting in Child Welfare

Jess McDonald, Director
Illinois Department of Children and Family Services

Wednesday, September 6, 2000

Every child deserves a stable and lasting family life.  This basic principle of “permanency,” endorsed as far back as the 1909 White House on the Care of the Dependent Child, has been a goal of public child welfare systems for most of this century. But it is only in the last few years that substantial progress has been made in bringing permanency to the lives of thousands of children who otherwise would have spent their childhood in foster care.  I am happy to say that Illinois has led the nation in this trend for the past two years.  We were recognized in both 1998 and 1999 by the White House’s Adoption 2002 Excellence Award for dramatically improving the number of children moved to permanent homes.

It’s my pleasure to be here today to discuss a program which has played a critical role in moving Illinois from one of the worst child welfare systems in the country to one of the best—Performance Based Contracting.  Our status as finalists for the Ford Foundation’s Innovations in Government Award provides Illinois with an important opportunity to demonstrate how government can be dynamic and smart in responding to the people it serves.

To understand Illinois’ innovation in contracting for child welfare services, it is first important to get a sense of the challenges that faced the state’s child welfare system during the mid-1990s.

The Crisis in Permanency

Although the commitment to permanency is a long-standing one, most states struggled in the early 1990s to make good on the promise.  Foster care caseloads rose nationwide from 280,000 children in 1986 to 502,000 children in 1996.  There were 6.9 foster children for every 1,000 children—the highest prevalence rate recorded this century.

In Illinois, the magnitude of the problem was much greater.  There were 17.1 foster children for every 1,000—the highest prevalence rate in the nation.  When I became Director of the Illinois Department of Children and Family Services in 1994, tensions were understandably high.  Foster care growth was eating up far more of its fair share of state revenues.  Workloads of 50 to 60 children per caseworker were commonplace, and there were routine calls to dismantle the agency.

It was obvious that change was long overdue.

Although the explosive growth in the Illinois foster care system ended in 1997, stabilization of intake was not enough.  Our read of the situation was that our substitute care system should have been half its actual size in 1997.  In the course of analyzing our caseload dynamics, we found children were staying far too long in substitute care.  As a result, the median length of time entering children stayed in care had lengthened from 8 months in 1986 to 56 months in 1996.  Addressing the permanency backlog became our top priority.

Investing in Permanency

Turning stable placements into legally permanent homes is no simple matter after years of inattention by the child welfare system.  As with other states, the growth in caseloads brought with it an expansion of the level of child welfare services provided by the private sector.  With so much of Illinois’ child welfare system privatized, the renewed focus on securing permanency for children posed unique challenges.  Longitudinal data collected by the Department showed that the rate of children exiting the system fell below the rate of new cases coming in system-wide. 

No small part of the problem was inherent in Illinois’ basic contracting structure.  Contracts based upon a fee-for-child payment can undermine permanency because once the child welfare issues have been resolved and the child is discharged, an agency faces losing revenue unless the child is replaced with a new referral.  This dynamic leads to the predictable practice of focusing the work on maintaining kids in care rather than aggressively pursuing permanency. 

Performance Contracts sought to change this on two levels.  First, the contracts made significant investments in activity that would support permanency—additional permanency focused staff positions; resources enabling providers to begin serving children more quickly upon placement; more resources for supporting children returning home to their biological parents; and the flexibility to use administrative funds to support different models of child welfare service provision. Second, and perhaps most importantly, the contract realigned financial incentives to secure accountability and reinforce the importance of achieving outcomes over maintaining children in care.  Agencies were allowed to use superior performance in moving children to permanency as a way of lowering their caseloads, maintaining their contract level and financially enhancing their program.

This shift was accomplished through redesigning how agencies receive new cases for placement services.  Upon the implementation of Performance Contracting in Cook County, all agencies were required to accept 24 percent of their caseload in new referrals.  Added to this was the expectation that all agencies would move 24 percent of their caseload to permanency—an outcome expectation reflecting a nearly threefold improvement over the then system-wide average of eight percent. 

The benefits and potential consequences were immediately apparent to contracted agencies.  By exceeding the 24 percent benchmark in permanency expectations, an agency could secure caseload reductions without a loss in revenue.  Falling short of the benchmark meant serving more children without a change in the contract level. 

Turning the Trend in Permanency

The success of the Performance Contracting initiative is best evaluated using three important measures:  the rise in adoptions, the rise in subsidized guardianships, and the rise in over all agency performance levels since the program’s implementation.

As I mentioned earlier, Illinois’ success in steadily increasing the number of finalized adoptions has brought the state a great deal of national attention.  During state fiscal year 1999, more children were moved to adoption than in the combined previous seven-year period of 1987 through 1994.  President Clinton’s Adoption 2002 Initiative has now twice recognized Illinois as the nation’s leader in securing adoptions for children.  The stated goal of this initiative was for states to double the number of completed adoptions by the year 2002.  Illinois managed to nearly pass this goal just in the first year, increasing the number of adoptions from 2,229 in state fiscal year 1997 to 4,293 in 1998.  During state fiscal year 1999, Illinois again almost doubled the previous year’s performance by finalizing 7,315 adoptions.  Although Illinois posted just over 6,200 adoptions by the close of the state fiscal year on June 30, 2000, this represents a slight improvement in the overall adoption rate as the foster care population continues to shrink.  In all three years, the majority of the increase in adoptions has been realized out of performance contracts.

Subsidized guardianship is a new permanency option in Illinois made possible through a Title IV-E waiver from the federal government.  The waiver was conceived of and designed to create a permanency option for relatives committed to the long-term care of children placed in kinship care.  The combined effect of this permanency option and performance expectations has been remarkable.  During state fiscal year 1998, 1,276 children were placed permanently with relatives.  During state fiscal year 1999, this number nearly doubled to 2,199 children, with an estimated 1,700 by the end of state fiscal year 2000.  As with adoptions, the majority of these subsidized guardianships were realized out of performance contracts.

Prior to the implementation of the Performance Contracting initiative in Cook County relative care, the average permanency rate for agencies was just 6.7 percent.  By the end of state fiscal year 1998, the system-wide average for relative care jumped to nearly 20 percent, with some agencies achieving results as high as 44 percent.  This strong showing continued into the second year of performance contracting which expanded to traditional foster care in Cook County, and in a limited way, relative and traditional care in the rest of the state.  During fiscal year 1999, system-wide performance in Cook County relative care climbed from 20 percent to nearly 30 percent, while the permanency rate for traditional foster care climbed from 14 percent to 24 percent.  By the end of state fiscal year 2000, the system-wide average permanency rate for Cook County relative care contracts continued to improve to 34 percent while traditional foster care finished at 25 percent.

Since the implementation of Performance Contracting, the dramatic increase of children moving to permanency has been nothing less than stunning.  The impact on Illinois’ caseload alone is amazing—a 40 percent decline from a peak of over 51,000 children in care to nearly 30,000 in just three years. 

As important as these gains are, the single most important accomplishment of Performance Contracting is the reinvestment made possible through consistent gains in permanency.  These reinvestments support better service delivery for children and families in Illinois’ child welfare system.  For three consecutive years, the Illinois Department of Children and Family Services has used the savings generated by declining caseloads in Cook County relative care to fund contracted caseload reductions of 10 percent (state fiscal 2000) and now over 20 percent (state fiscal year 2001). 

Ironically, when the Performance Contracting initiative was first launched for Cook County relative care in July of 1997, caseloads were funded at 25 children per worker—the highest caseloads in the state.  By the end of the first year of the initiative (state fiscal year 1998) it was possible to lower the contracted caseload from 25 children per worker to 22 children per worker within existing spending levels.  By the end of the 2000 fiscal year, average caseloads were lowered to 18 children per worker—now the lowest in the state.  These gains were made possible because of two dynamics:  the requirement that non-performing agencies give up contract-level and caseload; and the slowdown in new cases coming into Cook County for relative care placement. 

As this population declines and is concentrated with performing agencies, the savings from the smaller contracted caseloads of non-performers become available for reinvestment. The structure of performance contracts allows capacity to be easily transferred from the worst performing agencies to the best performing agencies without additional cost.  The success of these contracts made what would otherwise be an expensive and unwarranted move a reality.  Lowering caseloads in this way is an investment in the future that will continue to support improved work in serving Illinois’ children and families.

Sharing Our Lessons

Clearly, a child welfare system consists of more than just a contracting framework.  Although child welfare financing plays a central role in how service providers target and secure specific outcomes, they are actors within a much larger system.  Performance Contracting worked because Illinois had laid important ground work in making improved performance possible.

First, state laws had to be changed so that undue hesitancy about terminating parental rights was removed as a barrier to adoption.  In 1997, the Illinois General Assembly passed comprehensive legislation (“Permanency Initiative”), which among other things, eliminated “long-term foster care” as a permanency goal, reduced permanency planning timelines to one-year, and directed the Department to engage in concurrent planning to help achieve permanency at the earliest opportunity.

It is also safe to say that these accomplishments would not be possible without the partnerships we have been able to forge with the Court. Under the creative leadership of the Presiding Judge of the Cook County Child Protection Division, the Cook County Juvenile Court has taken the lead establishing the legal groundwork for moving Illinois wards into permanent homes.

Finally, the Department supported a real partnership with private service providers.  Conversations with providers have consistently emphasized sharing information on system performance, barriers to improving, and the on-going challenges inherent in serving a vulnerable population.  By reaching consensus on outcomes and the importance of results, the Department has been able to steadily turn improved performance into investments which have supported the very infrastructure of the child welfare system.

While there is clearly more work ahead, I think Performance Contracting highlights the power in identifying specific outcomes and investing in strategies which make improvements a reality.  Getting support for this kind of innovation at all levels of government can only create still greater opportunities for the future.

I appreciate this opportunity to talk about our work in Illinois.  Thank you for your time.